Page 244 - Automated Fingerprint Identification Systems (AFIS)

CONTRACTUAL ISSUES REGARDING THE PURCHASE OF AN AFIS 229

the life of the contract. Price increases are often stated as set percentages or
calculated on the basis of a known index, such as the Consumer Price Index
(CPI) or Core CPI.
Generally speaking, the government requests that costs be stated in one of
two ways: as a fixed price contract or as a cost reimbursement contract. While
there are many other variations, these are the two methods most typically used.
Each has its benefits and drawbacks. The key difference between the cost
models is which party assumes more risk. The type of costing methodology used
depends on the jurisdiction and agency practice.
With the fixed price contract, the vendor assumes the risk of contract per-
formance and its performance determines its profit. The vendor would seek to
tightly define the scope of work to be performed and seek establishment of a
mechanism to obtain reimbursement for additional work performed. The
benefit of the fixed price contract is the certainty provided to the government
over how much funding is needed. The opposing view is that vendor may resist
efforts perceived as expanding the scope, may have based the proposal on a set
of assumptions that were not well understood by the government, or may have
bid higher than expected in order to compensate for the additional risk. Thus,
in order to mitigate the risk with the fixed price contract, there needs to be
a clear definition of the deliverables and incorporation of a change order
process.
Under a cost reimbursement contract, the government reimburses the
vendor for its work and assumes the risk of contract performance. The vendor
provides an estimate of how much effort is needed and provides an hourly rate
for different categories of services. However, the vendor is not bound by the
estimate of effort. The cost reimbursement model requires the government to
make diligent inquiries to ensure the vendor has the necessary knowledge and
skills to perform the work so it does not pay for the vendor’s learning curve.
The vendor has less incentive to control costs, so the government must be pre-
pared to closely monitor the vendor’s performance and billings, resulting in
increased administrative costs for the government. It does not provide a firm
figure to use for funding purposes.
Consideration should be given to how the cost evaluation model treats cost
proposals that exceed the available funding. As the cost factor decreases in rel-
ative weight, this concept could become increasingly important to the AFIS
acquisition.

9.7.4.8 Determination of Apparent Awardee
The RFP establishes the steps followed to determine the apparent awardee of
the AFIS acquisition. One common process is that a committee obtains all the
results from the various evaluation stages and applies the weighting factors to